Ilana Mercer, February 9, 2007

Libertarians have a keen appreciation of how governments monkey with the money supply. This is but one of the reasons principled libertarians abhor the optional war pursued in Iraq. The war accounts for a good chunk of the $9 trillion in national debt. It’s a debt that has been increasing “an average of $1.47 billion per day since September 29, 2006.” At the time of writing, every one of us owed $28,921.

Yet, never once have the war harpies and their hombres in the ideological trenches indicated they comprehend how and who is paying for all this. I know they believe we’re not being taxed in lieu of the debt, a faith they base on Bush’s promise not to raise taxes.

Pro-war pundits, women especially, think that government can spend what it doesn’t have without any economic repercussions. They’re a lot like babies prior to acquiring object permanence: what isn’t visible doesn’t exist. However, government spending more than it collects in revenues is the cause of the deficit.

And ultimately of inflation.

When he’s not borrowing, Bush supports the national debt by pressing the Federal Reserve and the printing press into service. Inflation is an increase in the money supply. It acts like a hidden tax. More fiat paper money in the system means that every unit depreciates, or has less purchasing power. “The money that people have saved,” explains economist Thomas Sowell, “is robbed of part of its purchasing power, which is quietly transferred to the government that issues the new money.”

This legalized counterfeiting—inflation—raises prices; the new money generates price hikes throughout the economy. However, it reaches the politically connected first. They get fat checks well before the general price increases caused by all the new money affect their purchasing power.

What if those whooping it up for this wanton waste of blood and treasure understood all this? Would they be less inclined to can-can for the moral and Constitutional corruption that is this war? Come to think of it, far too many pundits posing as populists have benefited handsomely from turning folks onto war—pornographically so. Besides, even if they’re not guilty of war profiteering, the distaff side of the commentariat won’t get it; women don’t understand money. They think more paper money in their pocketbooks means they’re richer.

Ditto Robert Mugabe. The New York Times, ever the obfuscator, has declared that Zimbabwe is in its final economic death throes due to… hyperinflation. Not because of Mugabe, the thug and Thief-in-Chief, mind you, but due to this hydra-headed beast: “[h]yperinflation has bankrupted the government, left 8 in 10 citizens destitute and decimated the country’s factories and farms.”

Mugabe, Zimbabwe’s Leader for Life, turned Africa’s breadbasket into an economic basket case. He did this by instituting a Soviet style command economy. That stroke of genius, which went down well in the leftist West, entailed abolishing private property and distributing commercial, white-owned farms to rabble, who looted them and then let them fall into disrepair.

Like a house of cards, farm-dependent industries soon collapsed and famine ensued. The Marxist Mugabe has responded by fixing prices, which (as we’ll discover when Hillary does the same for medical services) caused severe shortages, and (in this case) starvation. The natural laws of economics cannot be suspended by man. Our torqued-up tyrant bolstered his economic planning with the attendant massacres, slaughtering his political opponents, which included free traders. Rigging elections was another pastime. (The UN-led civilized world responded by… condemning Israel.)

Back to inflation and hyperinflation. As the American national debt stands, we would not be admitted into the company of socialists: The European Union. The EU expects member nations to hold debt below 60 percent of GDP. Instead of opening new markets, Bush has inaugurated theatres of war. These will drain the private economy for decades to come.

While America’s $12.98-trillion economy groans under the weight of the federal debt, it is still fabulously robust. The private productive sector is just too driven and ingenious to crush. To be charitable to Mr. Bush, he has no desire to pulverize the economy, however bloody-minded he is (both in the British and American sense of the word).

The same cannot be said of Mugabe. (Or for his greatest supporter, South Africa’s Thabo Mbeki.)

There is only one way for a nation to become richer, and that is for its people to be free to produce, trade, and consume goods. Mugabe confiscated the assets of Zim’s productive, 300,000-strong white minority. Those who remain—fewer than 25,000—have become targets of crime and yet more oppressive economic policies. At the same time, Zimbabwe’s government has kept the printing presses running, spitting out worthless paper, so as to pacify the unproductive deadwood of the engorged public sector. These employees, however, can’t understand why a recent 300 percent raise has failed to compensate them for inflation: a 9000 percent increase will do the job…for a day, maybe.

Since few Zimbabweans are now capable of substantial production, the amount of goods in the Zimbabwean economy keeps decreasing. At the
same time, the money supply keeps increasing, hence hyperinflation.

Here’s hoping that the lessons of how Mugabe hollowed out Zimbabwe’s economy and left a husk in its place help hollow heads at home to understand more about the importance of the money supply. (That includes you, Michael Wines of the Times.)